Day of reckoning for America's economy...

If you are afraid of a drastic change in the economy for the worse, then you should be doing everything you can to make sure that EVERYTHING you own is totally paid off.
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Well, that depends. What if you thought the economy was going to have hyperinflation? Then it would be rational to go as heavily into debt now as possible. Your money isn't going to be worth nearly as much in the future so you should try to buy things you will need with it now. Your debt load won't be a problem either since you will be paying it back with money that is worth less. The government would be happy about it since the same thing would happen to those trillions of dollars of debt they have rung up. The people who would be screwed the most would be those poor "responsible" people who put a lot of money into savings!

So your "plan" depends on just exactly what you are preparing for!

Gregg
 
I didn't see any mention of any cash savings. Pay things off. Be debt free. Own assets, both fixed and mobile. Cash is something best avoided by everyone these days, as it has no actual value anyway, regardless of inflation levels.
 
I'm not going to spend a lot of time fretting about hypothetical problems. The fact is that life was easier for me than for my father, and his life was easier than his father's. My children are doing well, with one about to "graduate" into a seven-figure income, with another already in six figures, and a third destined for AT LEAST a six-figure income. Fourth is working steady; has respectable income with benefits. I think they're doing fine.

My granddaughters attend an excellent private school and are involved in more activities than I can keep up with...and, they're all happy.
 
Lucky you..

I don't see where things are so great. I work long days to pay my rent,buy groceries and gas and keep clothes on my back. I have no insurance,no retirement money and no good looking future.
Prices are constantly rising but wages aren't and the government has taken over any chances of the people making change.
We are polluting the earth to death and slowly killing ourselves with chemicals and pollution.
Medical care is totally out of hand pricewise and rather dismal professionally.
We are giving sick people drugs that have worse side effects than their original sickness. Our waters are nigh undrinkable. Our foods are full of chemicals and we are not a healthy nation.
I live in a funky apartment and pay the price of the rent on a new home. I can't save money because there is no extra after necessities.

Now I know somebody is going to jump right in and say change your situation. Well I have and this is the best I can find. I'm 55 and have a bad back. I cannot collect disability because I don't qualify and my skin color is wrong. I cannot collect any kind of govt. aid because I don't qualify.(I make too much money they say)and my skin color is wrong.

Now I'm not being racist,just stating fact. I never had a Cadillac to drive to the welfare office. I never had anmomnity like a illegal so I could not have to pay taxes and could send money out of the country.
I never had free medical care or free school supplies,clothing,place to live etc.I paid for everything I have the hard way.

I guess it's people like me who are the most outspoken because we see everyone from other countries being coddled and treated to a free life here while we had to work our asses off just to stay in the game.I was born and raised in the USA and I see illegals doing much better than me. Why? I was in the military. I am a citizen,I pay my bills.
Why do the deadbeats and illegals get all the freebies? We just get turned down because we "don't qualify".

The nation is going to hell in a handbasket and if it don't change soon,we'll see the outcome and it won't be pretty.
 
It was easier for my father than for his. It was harder for me than it was for mine. That applies to my generation as a whole; the first in US history to not do better overall than their parents. You're lucky, Ausser, and an exception.

OTOH don't mistake my words for complaint. I've got a big house out in the woods. Land, my own business, kids in private school, nice trucks. My dad did it by working a good paying job for decades. I've done it by playing the system, running my own business and manipulating credit because I'm good enough to play that game and win.

Most people aren't and they pay the price. Our economy in general is playing the same kind of game on a much larger scale. When it is time to pay that mega-price how well we individuals are doing, by whatever means we are doing it, won't matter too much. But hey, maybe I'm wrong. :)
 
Doubletaptap, the only thing I can think after hearing your short bio is that you still have the potential to lead a richer life than many of the most wealthy people in the world. I've been a little rich, I've been a little poor. And while it's nice not having to worry about where the rent money's going to come from in the next 3 days, I've found that money in the bank is absolutely no indicator of the actual richness of one's life.

But yeah, our dollars aren't going NEARLY as far as they did (seemingly) 5 years ago...and I'm SICK of all the super-duper-refined & processed sugar & chemicals that is in EVERYTHING we eat/drink/breath...everything seems to be going down the crapper.
 
I didn't see any mention of any cash savings. Pay things off. Be debt free. Own assets, both fixed and mobile.
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I'm not just talking about cash. I'm talking about the idea that "getting out of debt is a good idea in all cases." Well, it's not. In many cases, yes. But if you really thought we were going to enter a period of high inflation, why would you want to pay off your debt now? You would be better off _right now_ going into debt in order to buy some things you actually need. Not just to buy some trashy consumer stuff but stuff to make you more self-reliant.

Let's say you have $10,000 worth of credit card debt. And you get a $10,000 bonus (after taxes) at work. You _could_ pay off all your credit card debt in one blow. Or you could get a new roof for your house, put in a solar hot water system, buy some gold and silver, or get your cars all repaired and shod with fresh tires. Then hyperinflation kicks in. You can't afford to buy many things but you already bought many of the necessities. And you pay back your $10,000 debt with dollars that are only worth 20% what they were five years earlier.

I'm not trying to recommend this as a course of action. I'm just trying to point out that paying off debt isn't ALWAYS the number one best thing to do. It depends on what the economic future holds for us. Considering the fact that some type of high inflationary future is the only way I can see the government ever getting away from their own high debt, it does seem like a real possiblity though and one you should at least think about.

Gregg
 
Doubletaptap: I haven't done as well as my kids, but I don't get much out of complaining and whining about the general state of world, as I know that I am where I am because of my own successes and failures.

You don't have to look any farther than the nearest mirror to see why you are so unhappy, and I'm absolutely sure that your unhappiness has nothing to do with all those large issues about which you can do nothing. Also sure that illegals, etc., etc., aren't responsible for your dismal condition. If you can't make it in this country, where the hell do you think you could make it?
 
The day of reckoning is coming but its still a little ways into our future.

Here is why.

The health of any economy is based primarily on consumption. If the population is buying, everything is fine.

We have had the benefit of the baby boom generation. Statistically they spend the most physical cash when they are about 46. This continuous wave of spending by 46 year olds has proceeded unabated since 1992. Nothing any politician has ever done from Regan to Bush to Clinton to Bush has ever had a whit of effect on the actual economy. Those presidents were just lucky enough to be in office while the boomers spent.

In fact we have a few more years of this boomer consumption to enjoy. The boomer generation went from 1946 to 1964. So 1964 plus 46 years puts us at 2010.

The economy will come to a fairly abrupt stumble in 2011, by 2012 it will slow to a crawl. At the same time the first of the boomers turns 65 in 2011. At that point we will see, unabated, a growing number of boomers theoretically going on to Social Security. The rate, starting in 2010 will average 300 thousand new social security recipients a month for (theoretically) 18 straight years. And the probability that the first one to get social security will be alive when the last one in line comes through is very high.

The consumption that has been driving the economy will go cold and stay that way from 2012 until about 2027.

The ratio of young people to boomers will never be sufficient to pay for the boomer benefits. There will be no consumption as we have known it in the past. By 2020 the average working person would have to pay 85% of their income to cover social security demands alone.

At the same time the boomers start tapping the social security benefits the government will have to come up with cash to cover payments. The actual social security cash flow goes negative (ie not enough is collected to pay the bennys) around 2017. This will be observed long in advance.

When the government starts printing money to pay the boomers, the interest rates will go up fairly dramatically in order to attract lenders. This will kill investment in US treasuries long before it happens unless they are issued exclusively as inflation protected.

So between 2010 and 2020 things go to hell in a handbasket and no amount of wishing it otherwise will change a thing. All of this is based on known demographics and the ages of Americans.
 
If they can make the 12 million illegals legal (and I predict they will - right after the elections) they'll start paying taxes. Deficits tend to decrease when more money starts flowing in.
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Then who will be left to do the jobs that Americans (and legal immigrants) won't do? Judging by the rhetoric, the entire economy will collapse and the price of lettuce will skyrocket.
 
"We are in uncharted waters."

EVERY generation is in uncharted waters.

There are ALWAYS new things happening that make the previous generation's history not quite applicable to the next generation's.

No economy in the history of the world has ever completely, totally tanked. Not even during the height of the bubonic plague.

"I work long days to pay my rent,buy groceries and gas and keep clothes on my back. I have no insurance,no retirement money and no good looking future."

100 years ago you would have been saying the same thing, as would a LOT of other people. The great thing about it is that you have far greater options for changing the lot of your future than did people 100 years ago.

The United States, while there are certainly chinks in the armor, still has a GDP that is roughly triple our next nearest competitor -- Japan -- and nearly 5 times that of Germany or China.

Those nations are also facing their own internal financial pressures, both now and ones that are looming on the horizon.

As has been proven so many times in the past, even when the United States wasn't the world's dominant economic power, if the US economy tanks, the world economy takes a very serious hit as well.
 
EVERY generation is in uncharted waters.

There are ALWAYS new things happening that make the previous generation's history not quite applicable to the next generation's.
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Not really. The history of the US, for example, was essentially agrarian for the first two thirds of our existence. Energy was locally derived. Technology was limited to basic personal applications. Change was generational in nature. A collapse in one market or regional sector had limited effect elsewhere and foreign economic tides were negligible. One could apply historical context dating back hundreds, even thousands, of years very accurately because change was incremental, and our overall standard of living was low and little changed on average over a thousand years.

No economy in the history of the world has ever completely, totally tanked. Not even during the height of the bubonic plague.
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Tell that to the Romans, Greeks, Persians, Egyptians, various African nations and south and even North American Indians at various periods over the past 5000 years.

Anyway, an economy doesn't need to "completely" tank to devastate the lives of a majority of citizens. How far it needs to collapse is directly related to the debt load carried by both the nation and its people, and how it is carried. That's the point that keeps getting made in this thread in various ways. There's never before been a debt load like we have at all sectors of society today.
 
"Not really. The history of the US, for example, was essentially agrarian for the first two thirds of our existence. Energy was locally derived. Technology was limited to basic personal applications."

Yes, really.

The United States didn't develop in a vacuum unaffected by the industrial revolution, which was in full swing in the late 1700s. Industrialization, and the advances associated with it, had an enormous impact on the country.

Development of transportation infrastructure such as canals, the steam ship, and especially the railroad, had an enormous impact on the lives of virtually every American. Interestingly enough, the economic segment that saw the greatest impact from the development of the railroads? The agricultural segment.

Energy was locally derived... Unless you ignore the development coal mining in the United States with the first commercial mines around 1750. Yep, coal was an industrial commodity in the United States before there was a United States. By 1800, coal was being mined in at least 4 states, and was being shipped to every state in the union. By 1820 coal was the nation's primary energy source, and by 1835 it had almost totally surplanted wood as fuel for the railroads.

As coal rose, the iron and later steel industries also rose, which also had dramatic effects on the agricultural industry.

At the same time immigration was increasing expodentially, reaching levels far above anything we're seeing from south of the border today.

"Tell that to the Romans, Greeks, Persians, Egyptians, various African nations and south and even North American Indians at various periods over the past 5000 years."

You're confusing the fall of nations/states with their economies. The Roman, Greek, Persian, and Egyptian examples are non sequitors -- they fell via invasion, which resulted in one economic structure being replaced with another. Even so, the economic infrastructures inherent to the nations/states that were invaded did not totally disintegrate. They adapted.

"There's never before been a debt load like we have at all sectors of society today."

Incorrect. The debt loads carried by American corporations in the 1920s dwarf those of corporations today. It was the illusion of wealth created by fiscal policies at that time that created the economic collapse that led to the Great Depression.

I'm not sure where personal debt loads today stand in relation to those of times past, but I would not be in the least surprised to find that they aren't that much different. In the 1800s most Americans, especially those involved in agricultural pursuits, owed money. Revolving credit was an absolute necessity to those who depended on a successful crop every year.
 
OK. I'm sorry. I wrote a long rebuttal but the fact is trying to compare the limited use of coal in the 1800's to centralized energy today, the Industrial Revolution to the sweeping overnite changes of modern technology, failing to note the comparisons of invasion now to Roman experiences while also failing to note the total differences in pur past immigration waves vs the current one, and costs thereof due to welfare, etc is simply more than I care to cover.

You want history to fit into a neat box that supports your idea progress(and decay) is stagnant. I can't argue a logical fallacy like that. Your examples are all evidence of the lack of applicability of most historical precedent to our current scenerio but we'll never agree on that, so I suppose people will just have to choose which view they accept.
 
I bought my home in 1980 and my 30-year mortgage had a 12.75% interest rate. Then the rates went higher
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Pretty much sums up the *problem*.
Usually someone points the finger at W for *screwing up the economy*.
Do the math on the above.
1980 + 30 years = 2010.
Our current financial state had it roots back in the Carter & Reagan years.

Sure john could refinance his high rate mortage,,,but somewhere up the food chain,,,there is/was an institute that had to be stuck holding the financial bag.

Anywho - the *problem* isn't one of economics, petro -euros, job loss or even national debt.
We (the US) could go head to head/toe to toe with any country on the planet and beat them seven ways to Sunday - - excepet for one thing.

The .gov agencies that prevent it. OSHA, EPA, etc.

We (the world) are literally swimming in a supply of crude oil/shale oil. There's a 50 million year reserve of the stuff right under our feet locked up in the coal fields.
You want $.30 a gallon gasoline? Just remove all the .gov restrictions/taxes and you'll have it.


Oh - and BTW - there's no such thing as *debt free*. (been there /tried that/ have the scars to show for it)
As long as there's taxes, there's always bills to pay.
My wife and I make a modest income (> 6 figures combined).
Our "tax liability" is something like ~ $30K per year or roughly what one of us "nets". Either of us could lose our job and it would have zero effect on our short term income/purchases. If anything, we'd be in better short term finacial shape that we are right now.
One reason I'm so opposed personally to things like a flat tax is because our stragedy for the future has been to pay down our future tax burden "today" while we both work and can afford it.
Conventional *wisdom* has it that deferring taxes is the way to go.
BS!!! All that does is put off the bill to a future date where we aren't in as good a finacial state as we are right now.

A tiny example is our roof. We are getting a new roof put on since the one there now is 25 years old. They can do a layover or a tearoff. The teraoff runs ~ $1400 more. City code allow for only two layers, which means that in another 25/30 years when it needs done again, it would have to be a tearoff.
Right now $1400 extra isn't a real problem. In 25/30 years when I'm dead and gone and my wife is left to pay for it all by herself?
Way different story. I expect,,,given the present rate of inflation,,,that in 25/30 years that tearoff would run an extra $5K or so.
 
A few of the comments above are right on the money. I tend to see the most important long-term economic issues this country as being related to foreign trade, more specifically the trade imbalance. There are other problems as well that concern individuals more but foreign trade has a greater impact on the strength of the country as a whole, I believe.

Someone said we need to start manufacturing things here again and buying them here. That's it in a nutshell. We are buying more things from overseas than we sell overseas. It is true that American dollars are to an extent a universal medium of exchange, but there are limits. Ultimately they have to spent here. In any case, when we send them overseas to buy something and they don't use them to buy anything from us, our wealth is leaving the country. But there is more.

Foreigners holding US dollars do not have to buy good and services from Americans. Instead they can buy US debt, or, in other words, loan us money. Likewise, they can buy US property. They have done both. I realize that American companies have done the same thing overseas but overall, it is not a good thing.

And that's just one thing!
 
The 'elephant in the living room' is, I believe, the declining availability of cheap petrolium. I am convinced that the world, and most especially the USA, now faces the most serious challenge to its well-being in the last 50 years.

Every aspect of the US economy and infrastructure will be changed drastically as oil goes from $70/barrel to $100 to $200 to who knows.

We'll get through it just as we got through the Great Depression, but it's not going to be pretty.

db
 
The economy of the U.S. and the rest of the world is so complex and far reaching that professers who spend their entire lives studying cannot wrap their arms around it.You can be pessimistic or optimistic ,but to say any particular cause will result in this particular effect is going to be skewed by hundreds of variables that were never even thought about.Don't get in the normal human position where you decide what you beleive first,and then accept or discard information to support what you have already decided.
 
"I bought my home in 1980 and my 30-year mortgage had a 12.75% interest rate. Then the rates went higher..."


Pretty much sums up the *problem*.
Usually someone points the finger at W for *screwing up the economy*.
Do the math on the above.
1980 + 30 years = 2010.
Our current financial state had it roots back in the Carter & Reagan years.

Sure john could refinance his high rate mortage,,,
__________________________________________

Sure did. First time for 15 years at 9.25% and took an extra $5k out.

Second time for 15 years at 7% and took an extra $12k.

Five years or so ago I gave up and paid it all off because the interest payments weren't enough to get me on the intemized schedule.

Now I file the short form. :(

Now the real estate taxes each month nearly equal my original monthly payment. The house is worth 8x what I paid for it.

Would I buy like there's no tomorrow if I thought hyperinflation was just around the corner? NO. I've been wrong too often trying to predict the future. A bird in the hand, etc.
 
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